Project Summary Hospital acquired conditions (HACs) are common, costly, and deadly. Despite recent reductions, HACs still occur at a rate of 121 events per 1,000 discharges. Building on previous payment reforms to reduce HACs, the Centers for Medicare and Medicaid Services initiated the Hospital Acquired Condition Reduction Program (HACRP). However, the effect of expanding incentives for patient safety under the new HACRP is unknown. The objective of the current proposal is to understand the impact of the HACRP on patient and system outcomes and the specific strategies used by successful hospitals to improve under the program. Our proposal will address the following three aims: Aim 1: Evaluate the effects of the Hospital Acquired Condition Reduction Program on patient outcomes. We will evaluate the effects of the HACRP on both targeted measures (e.g. patient safety indicators) and downstream outcomes (e.g. 30-day mortality and readmission). We will examine how much administrative changes (e.g. increases in coded severity and changes to denominator criteria) explain the impact of the HACRP. We hypothesize that the HACRP will lead to decreases in targeted measures but will have an attenuated effect on downstream outcomes. We also hypothesize that hospitals with more revenue at risk under the program and hospitals that are engaged in more value-based reforms will experience greater improvements in targeted outcomes; Aim 2: Evaluate the effects of the Hospital Acquired Condition Reduction Program on spending. We will evaluate the effects of the HACRP on 30-day total episode spending as well as spending related to the index hospitalization, physician services, readmissions, hospital outpatient care, and post-acute care services. We hypothesize that the HACRP will lead to decreases in total episode spending as well as the downstream components of episode spending; Aim 3: Evaluate the factors responsible for improvement under the Hospital Acquired Condition Reduction Program. We will perform a case study analysis of hospitals in Michigan that participate in the Michigan Value Collaborative, a partnership between BlueCross BlueShield of Michigan and 75 acute care hospitals in Michigan working to improve quality and value. We hypothesize that hospitals that are engaged in systematic quality improvement efforts will experience greater improvements on both targeted performance measures and downstream patient outcomes. Our study is significant because our findings will be used to inform decision makers at the CMS about the impact of new reimbursement mechanisms on quality, safety, and spending. Our findings will also provide hospitals and clinician leaders with actionable insights about how to improve HACs. Our study is innovative because it uses unique data linkages, provider collaboratives, and multiple methods to evaluate upstream and downstream effects of a key policy reform.